Even if you only recently filed for bankruptcy, financial recovery is possible. It may be a few years before you see your credit score rise, but if you are vigilant and take charge of your financial future, you could see improvements quickly. The following are five tips to help fast-track your financial recovery:
Address the initial problem
Ask yourself what caused you to be forced to file for bankruptcy in the first place. Were you laid off ? Did you receive a pay cut? Whatever it was, attempt to remedy that problem to avoid finding yourself in a similar monetary situation. If you did receive a pay cut, for example, it might be time to find a part-time job to supplement your income. Then you can devise a budget knowing you have the financial resources to stick with it.
Monitor your credit report
You are entitled to review your credit report for free once a year from each of the three major credit bureaus. You can also order copies of your credit report at any time for a relatively small fee. Stay on top of your report because it is not uncommon for inaccurate information to appear on occasion. If you spot something that you know isn't right, contact the respective credit bureau immediately and request it be removed from your report. Your credit report and score are crucial to your ability to purchase real estate and, in some cases, to get a job.
Now that you have a clean slate, consider what you hope to achieve financially. Are you aiming for a healthy credit score, or are you also hoping to purchase a house or car within a few years? Your goals will help keep you on track and remind you why you are working so hard.
Gradually reestablish credit
You may have a difficult time finding a credit card company willing to take a risk on you post-bankruptcy because many companies have significantly tightened their standards due to recent economic conditions. But if you use and pay off one or two secured credit cards, it will help to rebuild your credit. Eventually, you will be eligible for unsecured cards with small limits and high interest rates. If you use one of these responsibly, it could lead to a higher credit score and invitations to apply for cards with higher limits and lower interest rates.
Avoid predatory lenders
Be wary of payday lenders and companies offering rent-to-own furniture, appliances and computers. These companies are quick to offer you credit, but it is nearly nearly impossible to abide by their terms. Those who attempt to borrow from such lenders typically find themselves trapped by exorbitant interest rates. It is better to wait until you have built up your credit score to borrow money or finance purchases.
If you need help plotting your financial recovery, seek the advice of an Atlanta financial advisor.